Rhetoric on Growth - Action on Cuts

Article |
May 14, 2012 - 9:41am

Hollande’s victory has also to be seen in the much wider context of a European revolt against the politics of austerity. The electoral revolt has been most dramatic in Greece, where the two main parties who backed the memorandum with the Troika have been decimated. Their vote shrunk from 77% to 33%.

German workers are also moving into opposition to these policies. German capitalism adopted a policy of ’wage suppression’ to cut living standards in order to regain ‘competitiveness’. But the effect was to accumulate a high level of savings in Germany and to encourage the EU peripheral countries to take on debt. That way, it was thought, they could buy German exports. But this whole strategy led to massive imbalances in the euro and this has helped to trigger the current crisis.

German workers recently gave their verdict on Merkel’s policy. In two key regional elections – in Westphalia and Schleswig-Holstein- Merkel’s Christian Democrats shrunk to historically low figures.

Enda Kenny’s Fine Gael party is linked to Merkel through its membership of the European People’s Party. The Celtic Tories support austerity but they are aware it is becoming deeply unpopular. So they roll out the Labour Party to claim that they are for growth all along.

But there is no substance behind the rhetoric.

The Fiscal Treaty includes specific mechanisms for limiting the ‘structural deficit’ to 0.5%; cutting the debt ratio to GDP to 60% over twenty years; and imposing fines for countries who do not build in automatic legal mechanisms to achieve these goals.

There is not one specific commitment on growth in the Fiscal Treaty. There are no figures either for EU wide investment or investment at the level of the national state.

There are no fines if a country fails to cut the numbers unemployed. There is no legal compulsion to increase state investment by any percentage.

In addition, the politics of growth and austerity are indirect contradiction in a recession. When domestic demand shrinks and the wealthy are not investing, only state investment can re-stimulate a market.

But under the Fiscal treaty any large scale form of state investment would be banned.